Theory Vs Practice

There is a long standing though controversial theory known as the Efficient Market Hypothesis. Basically, it rather bizarrely claims that well informed markets react with almost perfect efficiency in pricing new information into shares. So if a company makes a new announcement relating to its business prospects and therefore ultimately its earnings potential, the market will react with such speed as to make it almost impossible to act fast enough to produce a gain or prevent a loss. Prices, it says are always ‘perfect’. That is, the market is never wrong as it is just a reflection of the current consensus view, which in a rational market is usually rather accurate.

As with most academic models it certainly has its limitations, not least of which is the common sense observation that prices often behave in a way that is far from rational. This has led to a new field of behavioural finance which has the critical distinction of assuming that investors are far from cool headed, rational people that make sensible investment decisions. This is a notion that appears to agree with observation.

The fact is the general conclusion of both theories is remarkably similar. Whether or not you believe that markets are efficient and unpredictable, or irrational and beatable, both fields argue in favour of what is commonly referred to as the ‘buy and hold’ approach.

Whether or not the theories of market action are 100% correct is not important. What matters is that each field has produced a wealth of insight into the nature of markets, and importantly they have practical implications to the way we approach the market.

Short term trading with high leverage instruments can and does produce great riches for some, and all of us can see its great appeal. The research, however, indicates that unless you are prepared to invest a large amount of time and effort into learning the trade, you are more likely to damage your capital than grow it.

If you prefer a more passive approach you can nevertheless still reap great reward in the market, and best of all it doesn’t need to be hard work or high risk. The DividendKey course demonstrates the power of compounding exponential growth through ongoing reinvestment and contributions. It ain’t rocket science, but then again the best systems are always simple, unambiguous and founded on common sense.

The core principle of the DividendKey is that despite the chaotic and often hostile nature of markets, long term exposure to proven, reliable and profitable dividend paying stocks has always been very rewarding. And as it explained in the course, even a GFC or Great Depression doesn’t derail your approach!

The access we have to the giants of capitalism is what the market is all about, not the possibility of speculation on price volatility. Being a shareholder is about being a part owner in a successful commercial enterprise, the benefits of which may not be apparent from one day to the next, but over time can be an extremely rewarding relationship. That’s what the DividendKey is all about: sharing in the spoils of some of the largest and most profitable enterprises on planet Earth.

So if you are looking to sensibly and safely grow your wealth over time, visit www.dividendkey.com to learn more.